The continued decline in migration to Britain in the face of the economic recession means that the government is already on course to reach its goal of reducing the level to "tens of thousands, rather than hundreds of thousands".

The level of net migration – the number of people coming to work and live in the UK over people leaving to live abroad – has been falling sharply, from 220,000 in 2007 to 142,000 in September 2009.

Net migration has continued to fall in the past nine months and for the first time since Poland joined the EU in 2004 the number of east Europeans leaving exceeds those coming here. This trend is likely to accelerate next year as Germany lift its seven-year transitional restrictions on Poles working in the country.

This has been accompanied by a 15% fall in applications by skilled migrants from outside Europe – the group to be covered by the annual immigration cap – in the first three months of this year. It means that the coalition's aim of reducing net migration below 100,000 within five years is likely to be achieved whether or not the cap is in place.

It also explains why the home secretary, Theresa May, is able to satisfy Vince Cable's demands as business secretary for greater flexibility to protect Britain's global reputation as being "open for business". She can exempt staff transfers by multinational companies – known as 'intra-company transfers' – without jeopardising the target even though they account for nearly half of all skilled migrants coming to Britain.

The real difficulty for the coalition is the pressure from the right of the Conservative party and groups such as Migrationwatch and Frank Field's Balanced Migration Group, to go much further and for net levels of migration to be cut to 40,000-50,000 a year.

May was careful today to say that she had not endorsed such figures and it is easy to see the reason for her caution. To hit such a target the home secretary would have to impose major restrictions on overseas students and family members of British citizens. The education secretary, Michael Gove, has already privately voiced concerns about the financial implications for higher education of cutting overseas student numbers.

The real test will be to see how the migration limit copes when the economic recovery arrives and shortages of skilled labour develop. Instead of cutting higher education's financial lifeline and sending some lower-rated colleges to the wall by reducing overseas student numbers, the colleges could be used to ensure Britain's younger generation have the skills to meet the upturn.